At 20:19 16/06/2011, Natalie wrote:
Thanks, Keith,
Interesting. Yuan as a trade currency appears to be a short term
measure of relative necessity, obviously easily pulled off with
Russia and India because they need China's, as opposed to US's
non-existent, goods.
As far as I'm aware, there's no yuan-rupee exchange. China and India
can only trade via dollars.
But despite the mutual benefits for trade, gold is still being
hoarded by these three, not only in an attempt to surpass the Fort
Knox supply, but because all paper currencies are tanking.
Although gold is still the fundamental reserve currency at central
bank level (and a state secret in many countries including America,
China and Russia) it has only been in the last 12 years or so that it
is being increasingly bought as such (kicked off by the European
Central Bank when it was started). Until then the single largest
buyer was India for dowry purposes (as jewelry mainly made in Italy),
more recently overtaken by China for jewelry, architectural and
family gift purposes (as tablets). In one or two south-east Asian
countries it has recently started to be used as a convenient customer
currency for mid-level items (e.g. houses, luxury cars). In Germany
and the Middle East it is being increasingly available for the
middling rich as tablets from cash machines. Mints everywhere are on
overtime. Gold is gradually forcing its way back as a currency in its
own right despite attempts by America in 1931 and 1944 to outlaw it.
The article you quote is probably correct for India's central bank
holdings, but the figures from China and Russia are years old and
probably greatly understated. Both China and Russia are major
producers in their own right. Russia is on maximum production and
China is strongly rumoured to be so (all of it going into reserve,
its gold imports going to private buyers).
It's unlikely that the than could succeed, or let's say maintain
success as the next leading world currency because China is also
now feeling the effects of inflation; its true GDP is about half of
the 10% currently publicized,
I don't know where you got that from. Mind you, all GDP figures are
unreliable as true measures of 'progress'.
while its government is cracking down on banks and lending
policies, preparing for financial downturn.
Because, as I've mentioned before, the Chinese government has total
control over its banks whereas in America and Europe the banks still
make the running even after the credit-crunch. It will probably take
another catastrophe before they're finally brought to heel.
They're going to run out of food and water, as will India, sooner
than Western nations, and their population is aging, with few
youngsters to consume their way to Western nation's one-time huge
Boomer growth rates. They will be facing the same sky-rocketing
medical costs as the West, and along with an aging population,
further Q.E. due to less spending and fewer taxes being collected.
Q.E., as the following article points out, is global, and China
will suffer its application as much as the next country.
You've presented a strong case for, at least in the short term, a
than-dominant trading currency amongst the lead players. But does
China hope to hang on to such a system, and to also re-establish
gold as a currency? Would they consider it necessary, an unavoidable
correction that would benefit all nations, if they were to achieve a
than-dominant exchange?
I suspect that gold (and silver) will once again become the global
reserve standards, at least until there is a complete global shift
in economic valuation. Mind you, that's only if lawlessness doesn't
gain complete control. Many could argue that this has been the case
for decades now, and almost as many might say the global financial
crisis came about in large part because of the lack of a gold
standard. Either way, the precious metal supply is just not there,
with few new reserves being found.
It has been gold's relative scarcity (coupled with its malleability
and uncorrodability) which has made it the supreme wealth indicator
for thousands of years, though only recently (19th century) being
fully developed as a practical global currency. In a totally free
market (to which we now seem to be heading again) it doesn't really
matter how much or how little gold there is -- its price will adjust
accordingly. (In actual fact, there's oodles of gold in all the major
continents. It's just that it becomes exponentially more expensive to mine it.)
Like oil, it will continue to climb, but unlike oil, its usefulness
will not diminish. Apart from its likely restoration as a currency
reserve, it has ever increasing industrial applications. An
increasing global population also puts a demand on personal stashes
and jewelry production. Another way to look at it is that, as this
article points out, its value hasn't gone up--it's that currencies
have so greatly devalued.
I learned, when I observed a slight drop in precious metals last
month, that the US rules had tightened for buying on margin. I
presumed that the US was trying to manipulate the market, and its
currency lead. Of course, if gold were to become the standard
reserve, their debt would become immediately irredeemable. But the
climb is inching back up, with only occasional dips from continued
political misinformation.
Yes.
Hope you enjoy this:
<http://www.goldinmind.com/gold-updates-news/gold-investing-economy/outlook-2011-three-dominant-factors-will-impact-gold-silver-and-platinum-in-2011.html>http://www.goldinmind.com/gold-updates-news/gold-investing-economy/outlook-2011-three-dominant-factors-will-impact-gold-silver-and-platinum-in-2011.html
It's better than just an ad.
It's badly out of date, however, regarding fossil fuel supplies.
Gas-fracking has put paid to the notion of peak supply. Due to
developments in advanced deep-drilling it's only relatively recently
that very deep gas-fields have started to be seriously surveyed.
There are massive gas basins, particularly in America and Russia.
There are pollution problems with fracking but, so far, much less
than those as a result of oil or the existing high level gas fields
(and certainly far less than the health problems of coal mining or
the environmental destruction caused by production from tar sands).
If you regard the IPCC case as being far from proven so far (as I do)
then there'll be plenty of clean energy for many centuries to come,
particularly when world population seriously starts to dip from
2040-2080 onwards (if present urbanization trends -- and subsequent
small family sizes -- are maintained). (If you believe in
anthropogenic global warming then the relative cheapness of future
natural gas ought to make CO2 sequestration easily affordable.)
Keith
Natalia
<http://www.goldinmind.com/gold-updates-news/gold-investing-economy/outlook-2011-three-dominant-factors-will-impact-gold-silver-and-platinum-in-2011.html>
On 6/16/2011 2:24 AM, Keith Hudson wrote:
Natalie,
As you were kind enough to ask me, here are a few more comments for
you to chew over. (I was tired last night and my bed was calling me!)
While Europe and America are proceeding towards their respective
train crashes (unpayable governmental debts) China is now quietly
proceeding with Plan B as fast as it can.
But what was Plan A? This was the naive belief on the part of the
Chinese government in the past few years that they could persuade
America by rational argument to take part in founding a new world
trading currency. I am, of course, not privy to the details of what
the new world currency would be based on. The Chinese Politburo
might have conceived it to be based on the free market price of
gold. Or on the price of grain. Or on the price of energy. Or on a
balanced package of existing national currencies. Who knows? It
scarcely matters, so long as it was on a basis that alters only
slowly from year to year.
No matter. The US Treasury (the true masters of US financial
policy) repeatedly sent the Chinese packing with a flea in their
ear. This has been public knowledge for the past two years or so.
(The Chinese were probably trying privately for several years
previously. In my opinion, ever since Deng Xiaoping's launched
China's free-market reforms in the 1980s.) Anyway, it looks as
though the Chinese have now given up on this hopeless quest. As
they watch the printing presses (or digital keyboards) of the US
Federal Reserve or the European Central Bank -- and many other
central banks -- churn out more of their national currencies they
must be saying to themselves: "Those whom the Gods wish to destroy,
They first make mad."
So what is Plan B? It is to promote the renminbi (yuan) to world
class status as a universal trading currency. This would displace
the dollar and the euro from their present 55% and 40%
duopoly. This has been public knowledge (to the observant) for
about two years now, ever since the Chinese government enrolled
about a dozen major Western banks, such as HSBC and JPMorganChase
as their associates. Their job is to acquire enough renminbi in
their cash reserves so they can give credits to any of their
customers which are negotiating trade transactions which could be
carried out in renminbis. At a higher level, the Chinese government
are now making more formal agreements (actual trading floors at
both ends) with other governments so they can more directly
exchange their national currencies with the renminbi, rather than
going through the dollar or the euro as intermediaries (with their
risks of daily fluctuations due to speculators).
So far, at various stages of fruition, these arrangements involve
Russia, Brazil and about a dozen more countries. After about a year
of Plan B, the renminbi accounted for 1% of world trade. A year
later, this reached 7%. By now it's probably at least 10% and
heading towards 20%. Given no financial catastrophes in Europe or
America (on which China still depends as export markets) then the
renminbi will probably reach about 30%, this being the size of the
trading market which Chinese firms (governmental and private)
presently have -- directly -- with other emergent countries.
Overall, this would then approach the "multipolar" trading currency
of something like 30:30:30 (dollars, euros, renminbis) that some
economists are already forecasting.
But this doesn't take into account that the emergent countries
already occupy about 55% of world trade and is still growing
relative to the advanced countries. Within that, the direct trade
between China and the emergent world would also be growing. Within
a few years the multipolar currencies could easily arrive at a
20:20:60 ratio. But this also assumes that there'll be no shocks to
the dollar or the euro along the way. If the US Bond market in
America, or the Eurozone collapses (either would also trip off the
other) then the ratio could become 0:20:80 or 20:0:80 overnight. Or
at least within a few days, depending on whether China decides to
save America or Europe. Either would probably give just enough
export market (in addition to the emergent countries) for China to
barely survive. China would not be able to afford to save both (as
it is helping to do at present by holding a large part of American
government debt) and would have to save one or the other because
it, too, would be in desperate circumstances. (My guess is that
China would save America and also a German-northern European
detachment from the ex-Eurozone.)
I'm sure that China does not have a Plan C as such, any more than
America had in the years before the Bretton Woods 'Agreement' of
1944 when, as a by-product, it displaced the pound as the
predominant world trading currency and replaced it with the dollar.
It was "all for the best in the best possible world" as Dr Pangloss
would have said. So it would be with Emergency Procedure C. The
renminbi would perforce have to take the place of the dollar and/or the euro.
China's Plan B can't be avoided. But what about Emergency Procedure
C? This could be avoided. Western and European governments could do
what the Chinese government always does. This is to establish total
control over its banks by insisting on sufficient reserves. In its
own inflationary difficulties from time to time, the Chinese
government not only adjusts its interest rates but also its banks'
reserves (governmental and private), thus preventing undue credit
expansion. American and European governments haven't done this for
20/30/40 years. They've been running on 0% for several years now
even though the Bank for International Settlements (the central
bank for central banks) has been telling them how foolish they have
been. In effect, the banks and the financial sector have been in
control. No wonder the credit-crunch finally found them out (that
is, both governments and banks). Even now, knowing what must be
done, they are still largely only talking about it, with only
feeble nods in that direction.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/06/
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/06/
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